Vodafone identifies European 4G growth opportunity; reports revenue declines in June quarter

Vodafone Group said Europe still offers significant opportunities to grow its 4G subscriber base because only 30 per cent of its users in the region have taken a 4G subscription to date.

In its fiscal first-quarter earnings statement, which covers the April-June period, Vodafone announced that its European mobile subscriber base stood at 120.9 million at end-June, a 50.2 per cent rise year-on-year. That means around 36.2 million of Vodafone's European subscribers are on 4G contracts.

The figure shows that European customers account for the majority of Vodafone Group's 4G subscribers globally. The operator said it added 5.7 million 4G subscribers during the quarter, taking its total user base to 52.5 million across 21 markets by end-June.

Vodafone's earnings statement indicates that exploiting the 4G opportunity will be a key element in future growth. The operator saw reported revenue in Europe decline 3.2 per cent year-on-year to £8.2 billion (€9.8 billion/$10.8 billion) during the quarter on the back of declines in Germany, the UK, and Vodafone's 'other Europe' category, which covers Albania, Czech Republic, Hungary, Ireland, Greece, Malta, the Netherlands, Portugal, and Romania.

Vodafone explained that service revenues in Germany declined due to lower roaming revenues and a strong performance in the 2015 quarter. In the UK, the operator blamed the decline on a billing system migration, lower out-of-bundle revenues, and a one-off boost to its 2015 earnings from a large enterprise contract.

Performance in the Netherlands was impacted by tough price competition in the country's mobile market and regulatory pressure on roaming revenue.

Vodafone's reported revenues in Africa, Middle East, and Asia Pacific (AMAP) declined 6.2 per cent year-on-year to £4.1 billion.

Vittorio Colao, CEO of Vodafone Group, said the operator "continued to make good progress during the [fiscal] first quarter", pointing to stable growth in Europe and strong momentum in AMAP. He said Vodafone is "focused on improving our performance in the UK" and noted that customers "in multiple markets are attracted by our 'more-for-more' commercial offerings of larger data bundles and extra services".

Analysts at Jefferies agreed that Vodafone Group's performance in the quarter had been solid, noting that a 2.2 per cent year-on-year rise in organic service revenues to £12.6 billion was some 30 basis points ahead of consensus.

In a research note emailed to FierceWireless:Europe, Jefferies also pointed out that Vodafone showed improving trends in its European mobile service revenues, with a 0.8 per cent decline in the recent quarter compared to a 1.1 per cent drop in the three months to end-March.

The improving trend, combined with a reiteration of full year guidance "may ease fears that mobile competition could impair Vodafone's growth/margin recovery," Jefferies noted.

For more:
- see Vodafone Group's earnings statement (PDF)

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